PG&E slammed for 'meaningless' changes

PIPELINE SAFETY

Updated 11:07 pm, Friday, August 24, 2012

Pacific Gas and Electric Co. made "meaningless" pledges following the San Bruno pipeline disaster while doing nothing to change its corporate emphasis on profit over ensuring the safety of its natural-gas system, a top California utility safety official alleges in an extraordinarily harsh regulatory filing.

"Jingles and slogans aside, PG&E Co. has not changed its focus from serving the board to serving its customers, captive ratepayers and people of California," safety program manager Raffy Stepanian wrote in urging the state Public Utilities Commission to impose sanctions against the company in connection with the San Bruno explosion. "PG&E Co. has not delivered real corporate culture change."

The company has said it expects to be fined a total of more than $200 million for several regulatory violations stemming from the September 2010 blast, which killed eight people and destroyed 38 homes. Meanwhile, it began a $10 million advertising campaign last month that features CEO Tony Earley, who joined PG&E after the pipeline explosion, acknowledging that the company "lost its way" before the disaster and promising to improve safety.

At the time of the blast, Stepanian managed the commission's utility safety branch. The 23-year agency veteran oversaw the state's San Bruno investigation and wrote the commission report that said PG&E had committed a string of state and federal safety violations.

He now is program manager in charge of the commission's oversight of state utilities' electrical safety operations. He declined to comment on his broadside at PG&E.

Rebutting PG&E

His critique, filed this week, amounts to the utilities commission's official rebuttal of PG&E's denial of allegations that it violated safety laws and regulations leading up to the San Bruno blast. In its filing, PG&E took regulators to task for finding fault with its practices when pre-explosion state audits had found no violations in company operations.

Both filings were submitted to an administrative law judge, who has scheduled a hearing next month as part of the process of determining how much PG&E will be fined. The judge will issue a recommendation to the five-member utilities commission, although the agency's staff and PG&E are also conducting settlement talks.

"PG&E continues to use meaningless phrases like 'public safety and operational excellence' throughout its testimony and in its news releases," Stepanian said in his filing. He said its "history demonstrates that PG&E Corp. cannot appropriately balance the responsibility for both pipeline safety and maximizing profits."

PG&E Corp. was established as Pacific Gas and Electric Co.'s corporate parent in 1997. Its sole function is as a holding company for PG&E, and Stepanian sees that as contrary to a safety-first mentality.

'Biased' toward profit

"A publicly traded corporation that relies exclusively on growth derived from the profitability of a single regulated utility will, by its very nature, be biased toward shareholder financial interests when weighed against safety," Stepanian wrote.

Corporate structure aside, PG&E has resisted changes since the San Bruno disaster that would emphasize safety, Stepanian said.

Although a revamped bonus system puts greater emphasis on safety-related factors, such as the reliability of its natural-gas transmission system, Stepanian said, it's still weighted heavily toward PG&E's financial performance.

In the past, the company rewarded gas-system managers whose crews reduced the number of reported leaks and cut pipeline-repair expenses. While that standard has been dropped, Stepanian said, PG&E's latest efforts to increase consideration of pipeline safety "are too small to change employee behavior."

The company's financial performance should not be part of the bonus plan at all, he said, and managers should be rewarded or punished based primarily on their safety record.

'Toothless' changes

Stepanian also challenged PG&E's overall commitment to safety, saying that although the company has created several committees to upgrade safety, they "appear to be toothless." The committees lack performance criteria or specified powers to influence the corporate board in favor of safety, he said.

As for PG&E's post-accident pipeline-improvement efforts - including stepped-up strength testing, replacement and leak-inspection programs - Stepanian said most simply follow existing law or regulators' orders.

"PG&E is being forced into a new safety paradigm," Stepanian wrote.

PG&E response

In response, Todd Burke, a company spokesman, said PG&E is working to "create and maintain the safest gas pipeline system in the country."

"It will take time, but we have every reason to get it right," Burke said in a statement. He cited as improvements the company's decision to separate gas operations from electrical service, the bonus changes and increased pipeline-leak surveys.

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